Can India and China Redefine the Global Tech Order?

Navi Radjou is an independent thought leader, strategy consultant, and a Fellow at Cambridge University’s Judge Business School.

I am currently attending the World Economic Forum’s Annual Meeting of the New Champions in Dalian, China. Yesterday, I facilitated a workshop that explored the rise of India and China as innovation superpowers—and its implications for Western companies, especially in the tech sector.

China and India are massively investing in innovation as they seek to move up the economic value chain. In 2010, Chinese companies—such as Huawei and ZTE—altogether filed a record 313,854 patents—making China the second largest patent filer in the world right behind the US (326,945 patents). Similarly, the Indian government has set up the National Innovation Council—chaired by Sam Pitroda, the forefather of the Indian telecom revolution—to discuss, analyze and help implement strategies for inclusive innovation in India and prepare a Roadmap for Innovation 2010-2020.

Western companies such as IBM, DuPont, and SAP are contributing to—and benefitting from—the growing innovation capabilities of India and China by opening more R&D labs in both Asian countries where their engineers and scientists are developing frugal products and services that are relevant not only for local markets but can even be commercialized in cost-conscious Western economies. Interestingly, Indian and Chinese companies such as Lenovo and Tata Group are also globalizing their innovation capabilities—by opening R&D labs in Europe and the US. As a result, we are entering a world of “polycentric innovation” in which innovation is no longer confined within a particular region—rather, a product idea can today originate in either East or West, get developed by a cross-border team of R&D engineers, and then commercialized across multiple markets.

But can polycentric innovation be sustained? In our workshop, we explored three possible scenarios for how the global tech economy could evolve in coming decade:

Scenario 1: The Rising Tide Lifts All Boats. In this optimistic scenario, India and China rapidly evolve into innovation superpowers—with active support of enlightened Western companies who benefit from their rise as they deepen their presence in both giant Asian markets.

Scenario 2: The Wasted Opportunity. In this pessimist scenario, India and China fail to realize their innovation potential—due to restrictive domestic policies, lack of easy access to venture capital, and a risk-averse culture. As a result, Western firms could not capitalize on two hugely lucrative markets and leverage their talent pools.

Scenario 3: Zero-Sum Game. In this worrisome scenario, Indian and Chinese firms compete head to head with their Western rivals—against the backdrop of protectionist government polices that restrict market access in their respective countries.

While the majority of participants in the workshop predicted that Scenario 1 is the most likely to unfold, they also offered some insightful comments: 

• In the coming decade, Indian and Chinese tech companies will end up competing with their Western rivals not in their respective home markets but rather in other big emerging markets such as Africa and Latin America (Huawei, for instance, is already giving Nokia a run for its money in Africa).
• India and China need to invest significantly more to upgrade their countries’ innovation infrastructure in order to incent Western MNCs to shift their strategic R&D activities to both countries. For instance, China needs to urgently improve its intellectual property regime.
• Corporations must be prepared for potential backlash in Western economies against polycentric innovation—especially from populist policy-makers in the US and Europe who may feel threatened by the shift of innovation activities beyond national borders.
• US and European companies must totally revamp their Western-centric organizational models and shift more decision-making power to India and China if they are serious about capitalizing on both markets.

I believe these concerns are legitimate and need to be addressed swiftly in order to maximize the likelihood of Scenario 1.

I am curious to hear which scenario you think is most likely to unfold—and why?